What is scaling well?
There’s growth. And then there’s enduring growth.
Scaling well means the creation of a healthy, adaptive and human-centric working environment early on in a company’s lifecycle. It’s about placing values, purpose and, above all, people at the heart of the business and scaling with that in mind.
Companies that scale well are often easy to spot. Their cultures are typically rich and diverse. Their leaders are dynamic, far-sighted and self-aware. They encourage individual autonomy and creative expression, while also bringing colleagues together to share experiences and find common ground that exists beyond departments or functions. They invariably out-perform their competitors over the long term.
Worth fighting for, right?
Scaling well is a discipline that is consciously started and passionately maintained. Major programmatic change efforts at later stages are hugely expensive and rarely end well.
“Customers will never love a company until the employees love it first.”
“Nothing is more important or more difficult than to get the culture and people right.”
“Designing a proper company culture will help you get your company to do what you want in certain important areas for a very long time”
Scalewell provided a rigorous and insightful assessment of the founders and leadership team during our due diligence process. It allowed Smedvig to confirm post completion planning and support for the company which has supported good growth since.
— Rob Toms, Partner, Smedvig
Scalewell sees three dimensions that organisations looking to scale must understand and integrate. These are culture, leadership and organisation. Below are some of the most common challenges within each we have seen over the last 20 years.
1.
Culture takes cultivation. Make it a priority, not an afterthought
It’s tempting to believe that, as a business scales, its culture will be self-regulating and stable. It won’t. Without careful nurturing, especially through senior leader hiring, it can quickly be diluted and turn toxic, leaving behind a tale of “what might have been”. Businesses often get distracted with operational demands or the next “shiny ball”. Left unchecked, cultures can fracture, creating silos, minimal collaboration, politics, anxiety and fear. Drops in product and service quality, employee retention, customer experience and brand recognition soon follow.
“According to a Harvard study of more than 200 companies, a strong culture increases net income 765% over 10 years”
“Only 19% of executives believe their company has the right culture.”
2.
Leaders, the foundation of scale-up success, need open eyes and minds
Leadership in start-ups is make or break. Weak or inexperienced leaders often only discover their shortcomings once irreparable damage has already been done. Similarly, when they prioritise what feels urgent, such as day-to-day responsibilities, over what is really important, such as adopting a longer-term strategic outlook and building a high performing team, poor levels of engagement and unwanted attrition can quickly follow. Leaders who disregard the importance of culture, diversity and people are also prone to hiring in their own image, further entrenching the problem.
“Strong management is considered the biggest success factor for scaling up and business leaders consistently underestimate the value investors place on personal attributes such as chemistry, communications skills and resilience.”
“65% of the failures of high-potential start-ups are due to problems in the management team and people issues: relationships, roles and decision-making.”
3.
Not everything in an organisation can be a priority
Some organisations make the mistake of identifying a number of areas for improvement but then fail to determine the root causes of issues in those areas. Others attempt to solve multiple areas of development at once without prioritising and sequencing them, wasting precious time, energy and capital. A key principle of organisation design is “structure follows strategy”. Any attempt to redesign an organisation without a clear and aligned view on strategy will result in a structure that fails to deliver the strategy. If the strategy is not clear, an organisation should work on this before attempting to redesign the team. Similarly, work on hiring and onboarding processes without an understanding of the desired culture, will result costly mis-hires and employees who fail to meet expectations.
“69% of employees say they’d work harder if they were better appreciated.”
“The cost to replace workers who quit can be anywhere from one-half to two times the workers’ [annual] salary.”
Across each of the three dimensions of culture, leadership and organisation, we understand scaling by looking at eight elements within our proprietary Fitness to Scale model. This allows us to examine the business and communicate insights and recommendations in a clear and actionable structure.